South African Finance Minister Trevor Manuel said on Monday the National Treasury was ”comfortable” with its 4% average growth forecast for 2008.
The Treasury has rejected suggestions the economy could be heading for a recession, although there are signs it is feeling the strain of higher interest rates and slower global activity.
Official data put first-quarter growth at just 2,1%, compared with 5,3% in the final quarter of 2007, weighed down by a sharp decline in mining output mainly over an electricity crunch.
”It is too early to tell. We will watch developments closely. We are still comfortable that GDP growth will average 4% during the calendar year … 2008,” Manuel said in a written response to questions in Parliament.
He said a ”sharp rebound” in the mining sector coupled with good agriculture output and continuing public and private investment augured well for economic growth in 2008.
”Should the economy register no further growth during the course of the year, annual growth will still be 2,4%,” he said. ”Should GDP growth average just 3% over the next three quarters, GDP growth for calendar 2008 will be 3,5%.”
Manuel said if one removed a 22,1% decline in mining output during this time, South Africa’s GDP grew at an average of 3,6% in the first quarter.
”Given a sharp rebound in second-quarter growth [in mining and electricity], and a continued strong performance by the agricultural sector … we remain confident that even with economic activity weakening in other sectors, growth for the calendar year 2008 will still be strong,” he said.
Analysts say South Africa’s economy is also feeling the strain of 500 basis points worth of interest rate hikes since June 2006 as the central bank tries to rein in runaway inflation. — Reuters